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Market Rally Supported by Banks and Inflation Data Anticipation

The S&P 500 and Nasdaq experienced gains on Tuesday, with banks leading a rally in economically sensitive sectors. This surge comes as investors eagerly await the release of inflation data and the Federal Reserve’s policy meeting scheduled for next week. The rise in financials by 1.2% drove gains among the 11 major S&P 500 sectors, while the KBW regional banking index surged by 6.1%. Additionally, the Russell 2000 index, representing small-cap companies, added 2.8%.

According to Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management Company, the market is witnessing market leadership from cyclical parts such as financials, machinery, and consumer discretionary sectors. This development is viewed as positive, signaling a potentially more sustainable path for the market this year.

Inflation Data and Fed’s Policy Meeting Awaited

As anticipation builds, the forthcoming inflation data is expected to indicate a slight cooling of consumer prices on a month-over-month basis in May. However, core prices are likely to have remained elevated. Simultaneously, the Federal Reserve is widely expected to maintain interest rates at the upcoming policy meeting.

This expectation is supported by recent economic data and dovish remarks from Fed officials, which have increased the likelihood of the central bank holding interest rates. Fed fund futures suggest that traders have priced in an approximately 80% chance of the central bank maintaining interest rates within the range of 5%-5.25% during the meeting. Nevertheless, there is a 50% probability of a 25-basis-point rate hike in July.

Positive Signs for Sustainable Market Growth

The benchmark S&P 500 has experienced a substantial rebound of almost 20% from its lows in October 2022. This growth has been driven by gains in megacap stocks, a stronger-than-expected earnings season, and optimism surrounding the potential conclusion of the U.S. central bank’s interest rate-hike cycle.

Market analysts perceive positive signs for sustainable market growth, especially considering the recent performance of cyclical sectors. The market’s trajectory this year indicates a more robust and lasting path.

Fed Expected to Hold Interest Rates in June

Based on market expectations and trader sentiment, the Federal Reserve is projected to hold interest rates during its upcoming meeting on June 13-14. The CME Group’s Fedwatch tool reveals that traders have factored in an almost 80% likelihood of the central bank maintaining rates within the range of 5%-5.25%. However, there remains a 50% chance of a 25-basis-point rate hike occurring in July.

Market Snapshot and Volatility Index

As of 12:24 p.m. ET, the Dow Jones Industrial Average experienced a slight decline of 0.11%, equivalent to 36.20 points, resting at 33,526.66. Meanwhile, the S&P 500 registered a modest gain of 0.13%, equivalent to 5.73 points, reaching 4,279.52. The Nasdaq Composite demonstrated a more pronounced increase of 0.36%, equivalent to 47.14 points, reaching 13,276.57.

The CBOE volatility index, a measure of market volatility, reached its lowest level since July 2021, dropping by 0.5 points to 14.27. This indicates a relatively stable and less volatile market environment.

Coinbase Plunges Amid SEC Lawsuit

Crypto exchange Coinbase Global experienced a significant decline of 11.1% following a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The lawsuit alleges that Coinbase operated illegally without registering with the regulatory body. This development has raised concerns and impacted the company’s market performance.

coinbase

Apple Extends Losses Following Augmented-Reality Headset Unveiling

Apple Inc (NASDAQ:AAPL) continued to face losses, slipping by 0.6% in the wake of unveiling its costly augmented-reality headset, named the Vision Pro. This move signals Apple’s entry into a market predominantly dominated by Meta. The market’s response suggests potential challenges and competition faced by Apple in this emerging technology sector.

Advanced Micro Devices Receives Price Target Upgrade

Advanced Micro Devices (NASDAQ:AMD) observed a notable rise of 4.6% after Piper Sandler raised the stock’s price target to $150. This upgrade positions the price target as the second highest on Wall Street, according to Refinitiv data. The positive assessment indicates increased confidence in the company’s future prospects.

Market Summary: Advancing Issues Outnumber Decliners

A comprehensive overview of the market reveals that advancing issues outnumbered decliners by a ratio of 3.49-to-1 on the NYSE and a ratio of 2.70-to-1 on the Nasdaq. Additionally, the S&P index recorded 14 new 52-week highs and four new lows, while the Nasdaq recorded 86 new highs and 52 new lows. This data showcases an overall optimistic market sentiment with a higher number of advancing stocks.

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